AfCTFA brightens Africa’s production processes

African Continental Free Trade Area
(AfCTFA) has brightened the continent’s prospect for global production,
value chain management and rise in consumption capacity.

 

When analyzed independently, many African countries may not be economically viable and attractive to global market players.

 

What does AfCFTA mean?

 

The proposed Continental Free Trade Area
(CTFA) for Africa is a market integration agreement that presents an
equal opportunity open market to all participating countries in the
region. The plan would substantially remove obstructions
to movement of goods and services across the continent at the initial
implementation stage with the hope of progressing into a customs union
with free movement of capital and business persons.

 

This initiative is essentially driven by
the potential of creating an enlarged marketplace of 1.2 billion people
for all the 55 nations of Africa. Benefits anticipated by the promoters
of the idea include a boost to intra-African
trade and by extension industrial development, economic diversification
and economic growth among other key advantages. The CFTA is also
expected to amplify Africa’s market and economic possibilities to the
rest of the world and particularly to global investors.

 

Although the overall concept is to create
a level playing field for everyone, the gains for each country however
will be unequal depending on each country’s level of preparedness in
terms of institutional and developmental priorities
over the years.

 

Implications for other global markets

 

The implementation, enforcement and
monitoring of such agreements is very complex and more so in a place
with poor regional coordination. When fully implemented, the CFTA will
be a binding force and it will significantly impact
how individual countries negotiate with the rest of the world in terms
of trade agreements. Presently each African country and regional bloc
has several trade agreements with other global markets; some of these
agreements will have to be renegotiated to recognize
the existence of the CFTA.

 

Under the CFTA, African leaders will have
a stronger bargaining power on all continental and global trade issues.
An indication of this strength manifested in a recent interview with
David Luke, Coordinator of African Trade Policy
Center at UNECA, who said “Gone are the days when larger economies pick
us off individually; now they will have to deal with us all equally or
not at all”.

 

Considering how advanced economies have
engaged with Africa in recent past, it appears China foresaw its current
trade faceoff with the United States and has been preparing a soft
landing in Africa. The volume of US-China trade
of $635 billion is nothing compared to China’s trade of $170 billion
with Africa but in a worst-case scenario of prolonged irreconcilable
differences between the two countries, China would probably have more
leverage to explore alternative trade routes globally.

 

While China accelerated its global
engagements beyond the US market and especially with Africa, US- Africa
trade relations has been passive with total trade volume of $55 billion
in 2017.

 

Now that the US government is reviewing
its global trade relationships, several stakeholders have called on the
administration not to neglect Africa, the future global production power
house, or continue to sit on the sidelines
while competition from China, the EU and other places take over the
market.

 

This appeal needs to be sustained. The
United States Secretary of Commerce Wilbur Ross got the message. He
visited four Sub-Saharan African countries last month and announced
deals of $1 billion. The CFTA will be a major shift
in the global trading landscape; it will be interesting to see how
global markets respond to this development.